March 2001

Cleaning up the mess

Canadian city tackles contaminated sites

Steven D. Schiefner
City Solicitor
City of Moose Jaw, Saskatchewan

The City of Moose Jaw is located in Western Canada and, like most industrialized cities, has experienced its share of environmental contamination in the past. Some of this contamination has resulted from errors or negligence of someone. However, a significant portion of the contaminated sites in the City have resulted from the utilization of practices and/or equipment that, while acceptable in their day, clearly were inappropriate and, through the passage of time, have proven to have negative environmental consequences.

Besides the obvious consequences for the environment, one of the additional problems with a contaminated site is the resulting economic stagnation of the property. Unless the property can continue to be used for its original purpose (as a refinery, processing plant, rail yard, etc.), a contaminated site is, for the most part, undevelopable. The presence (or even the potential) of contamination has proven to have a profound effect on both the usability and marketability of the impugned property. For example, lenders now routinely require environmental certificates (i.e. to confirm absence of environmental contamination) before advancing any mortgage funds on a property. Potential purchasers are reluctant to acquire title to a contaminated property and are routinely advised by legal counsel to stay well clear of contaminated sites, including for purposes of mere investigation. Essentially, contaminated properties have become unmarketable and undevelopable.

As a consequence, many contaminated sites are abandoned by their owners. Certainly, no new development is taking place on any of these properties and any new investment is largely out of the question. Unless there happens to be some ongoing business potential not necessarily incompatible with the state of contamination, these properties tend to experience a rapid decline. Buildings and improvements are not repaired; routine maintenance is uneconomical; and, without regular activity on the site, the properties often become unsightly and unattractive.

Furthermore, as the properties fall into economic dormancy, municipal property taxes are unpaid and tax arrears accumulate. However, because of the potential liability associated with contaminated sites, municipalities have, for the most part, refused to take any form of tax title proceedings against contaminated sites. As a result, outstanding tax arrears continue to accumulate quickly which outstrip any market value remaining in the property. The result is that each year municipalities levy taxes on properties that they know will never be collected, causing a distortion in the tax roll. This distortion in the tax roll causes problems for not only the municipality but also every other taxing authorities for which the municipality levies taxes (such as the school boards, libraries, etc.).

Clearly, contaminated properties represent a layering of concerns from a municipal perspective, ranging from public safety to economic development to tax policy. The multifaceted nature of the problem has provoked a multifaceted motivation for municipalities to find ways to address contaminated sites. The City of Moose Jaw recently undertook a novel (and arguably more direct) approach to this problem by deciding to "clean up the mess," so to speak. Early indications are that this new approach has been successful and other municipalities are asking "how we did it!"

The first step was to secure financing. Obviously, remediation of contaminated sites can be expensive. Fortunately, the City of Moose Jaw was successful in securing $100,000 in seed funding from the Government of Canada through one of its regional economic development agencies. The next step was to negotiate a letter of understanding with the Provincial Minister of the Environment, to limit the City's potential exposure to unlimited liability related to the cost of cleanup. The essence of this letter of understanding was to acknowledge that the City of Moose Jaw was not the polluter and should not be treated as such. Rather, the City's role with respect to these properties could best be described as that of an environmental "Good Samaritan."

The City agreed to demolish all uneconomical buildings and structures, to remove and decommission any remaining underground storage tanks, and to remove and treat any contaminated soil found directly on the property. The Minister of the Environment, on the other hand, agreed that, if the City fulfilled its obligations under the agreement, the Minister would not hold the City responsible for any contamination that had escaped from the properties in question (i.e. to adjacent properties) or which had travelled beyond the depth of reasonable excavation (i.e. 10 feet in vertical depth). Finally, the City of Moose Jaw agreed that, as the sites were remediated (cleaned), they would be marketed for sale and the sale proceeds will be reinvested into the cost of decommissioning other contaminated sites in future phases of the project.

One of the rather unique (and yet fundamental) premises of this environmental cleanup project was the agreement of all of the parties, including the environmental regulatory agencies, that there would no obligation on the City to guarantee that all of the contaminated sites would be fully remediated or that all of the contaminated material would be removed. Rather, the City merely agreed to clean the sites, on a best efforts basis, within specified perimeters.

All parties acknowledged that, even if remediation were not completely successful, the City's efforts would not be in vain. Firstly, the sites would be cleaner than they were before the project began. Secondly, the nature and extent of the contamination will be better understood. Thirdly, depending on the level of residual contamination, the property could still be marketable for sale (albeit, as a site still subject to some residual contamination). Finally, even if the properties could not be sold (because of the residual contamination), the sites could still be used for other activities not necessarily incompatible with the level of residual contamination (urban green space, parking lots, etc.).

Obviously, site selection was a critical component of the project. Only properties with relatively minor forms of pollutants (petroleum products) were considered. Phase 1 environmental assessments (i.e. record/historical searches) were undertaken of all properties. However, no direct subsurface sampling (i.e. bore hole testing) was undertaken. Since the City's liability was already limited, clinical knowledge with respect to the range and extent of the pollution was not particularly helpful. Rather, such funds were better invested directly in cleanup efforts.

Another important aspect of Moose Jaw's project was the use of city forces to complete as much of the actual cleanup work as possible. An environmental consultant was retained only for the purpose of site supervision and independent verification of soil sampling.

To date, two of the three sites have been remediated. Site #1 was discovered to have four remaining underground storage tanks, with only localized contamination involving approximately 250 cubic yards of soil. The tanks were decommissioned and the contaminated soil removed and transported for decontamination. The entire site was cleaned up within 21/2 days, with the total cost being approximately $21,000 (Canadian), which included engineering and demolition costs.

Site #2 was discovered to have three underground tanks, all of which had experienced significant product loss. Site #2 was found to have moderate levels of contamination throughout most of the property, including free phase product at more than one location. The tanks were decommissioned and approximately 3,300 cubic yards of soils were removed for treatment (i.e. 13 times the volume of site #1). The total cost to clean up Site #2 came in at approximately $56,000 (Canadian) and took approximately 121/2 days to complete.

Simply put, Site #1 turned out to be a "best-case" scenario, with Site #2 being closer to a "worst-case" scenario. Nonetheless, both sites are now clean and marketable for sale and, on average, the project appears to be still on budget. At both locations, soil sampling was conducted by an independent environmental consultant, with copies of all test results and closure reports being provided to the adjacent property owners and appropriate environmental officials. Finally, significant interest has been expressed in both properties by potential purchasers. Site #1 has been sold by way of public tendering for the sum of $22,695, with the proceeds of the sale to be reinvested into the project.

Moose Jaw's experience in "cleaning up the mess" appears to have been cost-effective in both a best- and worst-case scenario. More importantly, however, Moose Jaw's approach has been entirely successful in limiting the City's exposure to environmental liability.

Further information regarding Moose Jaw's Contaminated Site Recovery Project may be obtained by calling the City of Moose Jaw at 1-306-694-4424.